PRICING

Price represents the exchange value of a product or a service.
The higher the buyer perceives the value of the product, the more they are willing to pay for it.

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Lamb 2003, price is that which is given up in an exchange to acquire a good or a service.
Kotler 1996, pricing as the process of determining the value of a product or service to consumers at a particular time in quantitative terms of dollars and cents

FARE – for use of air, road, railway or taxi services

RENT – use for apartment or a house

INTEREST is for banking charges on loans

CREDIT TERM – premium for insurance coverage

PRICING OBJECTIVES

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Marketing firm need to decide what they want to accomplish with a particular product.

Companies objectives is to MAXIMIZE PROFITS.

It is important for marketers to set the right pricing objective.

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4 internal factors affecting pricing decisions.

SALES ORIENTED PRICING OBJECTIVES

STATUS QUO PRICING

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Profit Maximization: marketers aim to make maximum profit in the current financial performance.

Marketers need to set the right price, so that total revenue is as large as possible relative to total cost.

Here doesn’t means that charging the customer higher price.

The company may need to estimate the demand and costs associated with alternative price

Satisfactory Profit: means a marketer set a price that give them reasonable level of profits. It must be satisfactory and agreeable to the stockholders and management.

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SALES ORIENTED PRICING OBJECTIVES

c. STATUS QUO PRICING

Marketers may use the ‘STATUS QUO PRICING’.

It is a pricing objective that help firms maintain existing prices or meets the competition’s prices.

When firms compete within an established price leader, they are safe if they follow the leader’s price.

This means the price will be close to other competitors or it may even be a comparable price

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Target Return On Investment: ROI is a popular profit pricing objective among many companies. With ROI, firms calculate their return on total asset.

It aims to measure the overall effectiveness of the marketing management in generating profits by utilizing its available assets.

ROI = Net Profits after taxes

Total Assets